A Study of the Discontinuance of Formula Funding of Institutions of Higher Education in the Commonwealth of Virginia

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Abstract

The formula method of allocation was used in the Commonwealth of Virginia to
fund institutions of higher education from 1968 until the recession of 1990.
Prior to the early 1990s recession, operational funding for institutions of
higher education in the Commonwealth was derived from a framework for staffing
guidelines, faculty peer-group benchmarks, and a student tuition policy. Revenue
shortfalls caused by the recession were insufficient to fund the resources demanded
by the guidelines or funding formulas. This led to the discontinuance of the
funding formulas that had guided Virginia's higher education funding for more
than two decades (Report of the Joint Subcommittee on Higher Education Funding
Policies, 1999).

The purpose of the study was to find out how and why the decision was made
to discontinue formula funding of institutions of higher education. The decision-making
process at the state level is often complex, uncertain, and difficult. The emphasis
of the study was to examine the rationale for discontinuing formula funding
for resource allocation to institutions of higher education.The study explored
why the Commonwealth of Virginia made this important decision.

The subjects of the study are the state-level decision-makers responsible for
funding institutions of higher education in the Commonwealth of Virginia. Information
on how and why the Commonwealth of Virginia reached the decision to discontinue
formula funding could only be obtained by in-depth interviewing of the participants
in the decision-making process.

Data were analyzed using the four streams of Cohen and March's decision making
model. Triangulation of the data served as a means of data validation. Conclusions
and recommendations for future study and practice are included.

The major findings were that were many complaints regarding the former formula
funding model. The model was a demand driven, rigid input based model that was
not linked directly to state revenues. The model was not mandated by the Code
of Virginia as was K-12 formula.

As required with time-sensitive matters, decisions have to be made to address
the issues at hand. The funding formulas were simply discontinued in the face
of adversity. Consensus was basically that the demand driven formulas were the
wrong methodology given the recession and demands for attention in other areas.